Financial System Stability Maintained during the Covid-19 Pandemic

Jakarta, InfoPublik –Bank Indonesia’s (BI) Communication Department Executive  Director Onny Widjanarko stated that  the financial system stability was maintained, amidst  continuoud monitoring on risks resulted from the widespread impact of Covid-19 on financial system stability.

"The  banks’ capital adequacy ratio (CAR) in July 2020 remained high at 22.96 percent, and the ratio of non-performing loans (NPL) remained low at 3.22 percent (gross) and 1.15 percent (net )," Said Onny in a press release received on Monday (28/9).

Nevertheless, Onny continued that financial sector’s intermediation function is still weak due to limited credit growth in line with weak domestic demand due to depressed corporate performance and banking prudence along with the continuing Covid-19 pandemic.

Credit growth in August 2020 was recorded at a low 1.04 percent (yoy), while the growth of Third Party Funds (TPF) was recorded at 11.64 percent (yoy) in August 2020.

"Looking ahead, banking intermediation is predicted to improve in line with the outlook for domestic economic recovery," he said.

According to Onny, several sectors have recorded an increase in credit growth, namely the Agriculture, Mining and Transportation sectors. In addition, total bank credit restructuring as of August 2020 has reached 18.64 percent of total credit, supported by maintained liquidity.

These various developments, said Onny, accompanied by the acceleration of the National Economic Recovery (PEN) program, among others, by strengthening credit guarantees by the Government, are expected to boost the banking intermediary function.

"Bank Indonesia will continue with accommodative macroprudential policies to encourage lending to accelerate economic recovery," he said.

Reporter: Isma, Translator: Penni P. Rusman